LendUp launches a better credit card for people looking to improve their credit

LendUp has spent the last several years helping people who couldn’t get a loan build their credit and improve their financial well-being. Now the company is looking to empower those with little or no credit by giving them access to a credit card with low fees, financial education built in and incentives to spend less and pay off their balance.

LendUp got its start providing an alternative to payday loans designed to be consumer-friendly and better for borrowers. With lower interest rates, an improved approval process and incentives designed to improve one’s credit and enable them to borrow more over time.

The company was founded on a mission of financial empowerment, and the introduction of its credit card product provides one more tool its users can take advantage of. Designed for users with no credit or bad credit, the card features low fees, requires no security deposit and reports to all three major credit bureaus.

“We’re becoming a multi-product company for the new emerging middle class,” LendUp co-founder and CEO Sasha Orloff told me. “A lot of the problem that this customer segment has comes from being subprime. If you have no credit score or a bad credit score, you’re going to pay a lot more [than someone with good credit].”

The LendUp card will give applicants an instant decision, which contrasts with a lot of more traditional cards, which don’t often give feedback right away. “Most banks don’t give an instant decision except to their most prime customers,” Orloff said. “And with this customer segment, they’re used to getting a ‘no’ all the time.”

But more important to the customer segment, LendUp is drastically reducing the fees associated with having a credit card. As mentioned before, LendUp doesn’t require a security deposit, and the card has a fee of no more than $5 per month, depending on a customer’s creditworthiness.

The card’s APR ranges from 19.99 percent to 29.99 percent, but will not go higher than that, even if a customer makes a payment late. With that in mind, Orloff notes that LendUp is offering an unprecedented 14-day grace period before issuing a late fee — and those fees are capped at just $7.

“The way credit cards are structured today, [banks] don’t think about how to make customers successful, but how to get them deeper into debt,” Orloff said. That said, he believes credit cards could actually be good for some users if used correctly. “We don’t want to make more money when a customer is struggling.”

In addition to low fees, the LendUp card features a companion mobile app that includes financial education and incentivizes people not to spend, or at least to pay off their balance so as not to incur fees.

Like LendUp’s other products, the credit card rewards users who make good financial decisions by increasing their credit limit over time. Introductory credit lines will start between $300 and $1,000 and can double after a year of responsible use.

LendUp’s credit cards are being issued in partnership with Beneficial State Bank, an Oakland-based institution that also seeks to provide better products for low-income customers. That mission began when hedge fund manager turned philanthropist Tom Steyer and his wife Kat Taylor founded the bank in 2007 as a Community Development Financial Institution (CDFI).